Business Directories

Senior staff ‘more likely to commit fraud’

Manama, September 27, 2012

Fraud in an organisation is most likely to be carried out by men between the ages of 36 and 45 in very senior positions and they are likely to be people who work long hours and avoid taking holidays, said an expert.

The problem with detecting fraud in an organisation is that for numerous reasons it is unlikely to be picked up by auditors and most fraud investigations are a reaction to an initial discovery of misconduct, according to KPMG Bahrain and Qatar associate director and head of forensic services Arindam Ghosh.

Ghosh made the claim in a speech to members of the Bahrain Chapter of the Institute of Chartered Accountants of India (BCICAI), following the organisation's annual general meeting at the Crowne Plaza Hotel.

"Unless an audit team is exposed to fraud, it cannot be sufficiently attuned to detect it," he said. "The very nature of concealment by a fraudster means that auditors are unlikely to detect it.”

"Fraudsters tend to be in high positions of authority, either at board level or in top management, which means their familiarity with the control environment makes it easy for them to cover up their actions," he added.

KPMG carried out a survey on fraud investigations, covering 348 investigations in 69 countries, including the GCC, which showed that more than 50 per cent of perpetrators were in the most senior echelons of the business or organisation while only 29 per cent of instances of fraud were carried out by lower management.

It showed that 87 per cent of fraudsters were men and 61 per cent of cases involved collusion with another employee.

The most likely culprits may be working in the finance division or in the chief executive or managing directors team, and 60 per cent of them would have been with the organisation for more than five years.

"Fraud is not something that can be eliminated but there are steps you can take to limit the damage," said Ghosh. "The most common response when a forensic auditor approaches a business is to be told that we can't have frauds here because the books have been audited. But auditors deal with small samples of how the business works, whereas to go in and detect fraud you need 100 per cent testing.”

"Fraud is dominated by opportunity, rationalisation and personal pressure. Opportunities arise when there is a lack of effective oversight and a lack of segregation of duties. If one person is in charge of everything then it is difficult to know what they are doing," he said.

"There are a number of ways people justify fraud. From arguing they do not get paid enough to claiming it's a victimless crime and saying 'so what - the company can afford it,' the reasons given are many," he added. – TradeArabia News Service